BREXIT and the amended PWD- the double shock

Brexit means significant changes for many UK SME providing services across the EU

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The first shock

Brexit means significant changes for many UK SME providing services across the EU (SMEs accounted for 52% of private sector turnover in 2020 and 60% of all private sector jobs; there were 5.92 million private business in the UK at the start of 2020 and 99.8% were SME’s with less than 250 employees-source: Department for Business, Energy & Industrial Strategy).

Brexit means the end of the freedom to provide services between the UK and the EU.

Regarding certain business sectors, “after Brexit” solutions are granted by the EU-UK Trade and Cooperation Agreement (hereinafter referred to as TCA), and mostly by host Member States’ national legislations (although with a significantly increased burden).

Unfortunately, certain business sectors are hard-hit.

In 2019, the British service exports to the EU in maintenance and repair, construction and manufacturing business sectors were valued at £4.8 billion (3.8% of total UK service exports to the EU). The numbers are not high in comparison to (e.g.) financial services (£25.7 billions), however, that it is a poor consolation to SME providing services in the sectors cited above.

In general, the services are provided by highly specialised technicians.

Regarding the legal person providing the service (i.e., the UK company) restrictions are rare (although not inexistent).

Example: a UK company may not provide construction services in Cyprus.

As regards the short-term business visitors’ scheme under the TCA, the after-sale or after-lease provision that should cover certain activities (mainly related to the maintenance and repair sector), contains restrictive conditions (e.g., the equipment must be installed, repaired, or maintained should have been purchased or leased by the EU customer from a legal person based out of the UK).

Hazardous interpretations are highly not recommended. National courts will strictly enforce rather than “create” public international law.

Exemptions provided for by MS’ national legislations (applicable to third-country nationals providing such services) are often no less restrictive or merely inexistent.

The business sectors cited above are listed in Annex SERVIN-4, and consequently the Parties have taken commitments as regards these sectors.

However, one of the criteria under the definition of contractual service supplier (TCA) is the possession of a university degree.

It follows that concerning specialised technicians (and considering the highly restrictive conditions under the definition provided for by the TCA, not only technicians), the host MS’ national legislation must be addressed (aliens employment acts).

Where immigration schemes (work authorisations) for specialised technicians are rare (if not merely inexistent in certain MS), situations in which the service may not be provided will became a norm.  

The second shock

Fortunately, certain situations can be addressed under the TCA, alternatively under the national legislation of the host MS.

Pursuant to Article SERVIN.4.1.3 (TCA), “Notwithstanding the provisions of this Chapter, all requirements provided for in the law of a Party regarding work and social security measures shall continue to apply, including laws and regulations concerning minimum wages and collective wage agreements”.

25 out of 27 Member States have transposed the amended Posting of Workers Directive into their national legislations (Directive 2018/957/EU, hereinafter referred to as PWD).

The main objective pursued by the amended PWD is to grant a higher level of protection of posted workers, as a means to safeguard the freedom to provide services on a fair basis.

To put it simple, the main objective of the amended PWD is to tackle “social dumping” (and it is unrelated to the administrative requirements and control measures from Article 9 Directive 2014/67/EU, due since 18 June 2016 and over-discussed today).

UK employers sending specialised technicians to provide services across the EU are bound by the PWD (“Undertakings established in a non-member State must not be given more favourable treatment than undertakings established in a Member State”-Article 1.4 PWD).

They must grant the technicians who are posted to the EU, terms and conditions of employment which are laid down in the MS where the work is carried out, by law, regulation, or administrative provision, and/or by collective agreements or arbitration awards which have been declared universally applicable (Article 3 Directive 2018/957/EU as transposed into the host MS’ national legislation).

Where the remuneration due in accordance with host MS’ legislations should not raise many issues (the average base remuneration a specialised maintenance technician earns in the UK is £28.440/annum), it appears that the burden of determining and applying the other relevant terms and conditions of employment and following certain strict rules, represents per se a shock overriding expectations.

We believe that notably in the context of Brexit, UK service providers might be identified as a priority for labour inspections.

The takeaway

Denial or ignorance will not add to the case. Accepting the fact that the new reality cannot be changed, will be the first step in determining how the new reality will impact the “ordinary course of business”.

A company “business case” can eliminate a great deal of uncertainty. Subsequently, each case (project) can be addressed on its merits (even twins are slightly different).

Is your company concerned about the topic discussed above ? We organise a webinar to address further details and answer your questions (13 May, 2pm UK, registration here : https://us02web.zoom.us/webinar/register/WN_UwhB0xymRXSCFXXxz9_e5A )

 

 

 

 

 

Tanel Feldman

Senior Partner , Immigration Law Associates

Immigration Law Associates provides in-depth advice on rights and obligations triggered by the cross-border element of a given legal situation. Our know-how is built on an extensive experience in EU law and is supported by a network of partners across the EU. Social security coordination : • Autonomous application of the social security coordination regulations and ECJ case-law, to any situation involves a cross-border element EU Company law : • Establishment -permanent activities • Establishment -self-employment activities International Private Law : • Law applicable to the employment relationship Labour and employment law : • Freedom of movement of workers-equal treatment, access to social benefits • Employment contracts and termination of employment • Working conditions • Employee benefits • Transfer of undertakings • Authorisations of work for third-country nationals Special regimes : • Posted workers • Frontier workers • Highly mobile workers • Employment of record • Intra-EU mobility of third-country nationals